The Ethics of Affiliated Business Relationships (ABA’s) in Real Estate.
The form is now almost commonplace in our market, so and so real estate company owns this title company, gets paid from this mortgage company and yada yada yada these other companies as well or/and this particular agent owns part of this title company and is getting “marketing” dollars from this list of companies sign her that we told you about it its not really a big deal. Not Really A Big Deal? Why hell yes it is and let me educate you on why it is.
Excuse my English but we as a Real Estate Industry have become WH****. Yes I said it WH****. We recommend the highest bidder to our clients that we have a fiduciary responsibility to look after. With reckless abandon we have stopped referring whom is cheapest, who gives the best service, which has the best products, it has become all about how many extra dollars can we squeeze out of a transaction. So lets dissect a transaction so we can see how real estate agents and brokers get paid so we can see just how absurd this is that we need to reach into the pockets of every other professional offering a service somewhat related to real estate.
I’ll choose to dissect how a buyer agent gets paid well because everyone knows how a listing agent gets paid.
Buyer Agent A shows properties to Buyer A. Buyer A finds a house they want and Buyer Agent A helps them write an offer. Lets use the assumption that this is a 200,000 home which is about average for the Omaha market please feel free to adjust my math if you are in a different area of the country. The Listing Broker then pays somewhere usually in the range of 40/50 percent of the total commission to the Buyer’s Broker. So on a 200,000k we are talking in the 5-6k range. Buyer’s agent A then splits that in some sort of a commission split with his broker I would say on average with him taking home 4000, and the broker taking home 2000. These are honest numbers but must we reach into your pocket for 60 dollars if you want a home warranty or an extra couple hundred dollars for title insurance or even worse send you to a lender that has inflated fees so the agent or broker can receive an additional kickback beyond the commission.
Question Number 1 for a buyer to ask when asked to sign an affiliated business Disclosure.
How much additional revenue do you earn from these affiliated Businesses? Your typical response is well I don’t get anything it goes to my broker. Your response should be how much does your broker get? If they don’t know or can’t answer its probably because either your agent doesn’t want you to know how lucrative it is or their broker doesn’t want them to know how lucrative it is.
You see when I first started out in this business back in 2006 I didn’t think anything of it. I ended up stumbling across blog.franklyrealty.com written by Frank Llosa broker owner of FranklyMLS.com. He was so passionate about protecting his clients from everyone else involved in a transaction it just really turned a light switch on for me. I need to stop referring whom is paying my broker whom usually charges above average fees as those kickbacks has to come from somewhere (you the consumer) and I need to seek out the individuals whom are the very best at what they do. I cannot tell you the number of times I have referred someone who was the broker’s affiliate only to have them provide a subpar level of service to have a client get mad at myself.
The people whom are the very best at what they do don’t have to pay to get their business. I’ve adopted a strict standard of only referring people that I have seen how they work first hand, and either someone I have used personally in the past or someone that I would definitely use if I were going to be shopping for that particular service in the near future.
I’m not writing this to let you know what companies you should or shouldn’t use in the Omaha Marketplace I am simply writing this because until the consumer is educated and starts to question these acts its going to get more and more out of control.